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Accounting

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by

Marissa Mann

on 2 July 2013

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Transcript of Accounting

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Income Statement
* It will list the service revenue followed by all the expenses incurred during that financial period.
Owners Equity Statement

* The accounting equation states assets equals liabilities plus owners' equity, which rephrased states owners' equity equals assets minus liabilities.
* Owners' equity is important because it shows how much is invested into the firm through ownership, not debt.
What?
Accounting can be defined as the theory and system of setting up, maintaining, and auditing the books of a firm. It is the art of analyzing the financial position of a business through its sales, purchases, and overhead. These records must be kept in chronological order and must be summarized in a useful format. It is also responsible for identifying information on the transactions, analyzing it and then interpreting each and every document.
Process
Individual Transactions

A) Identify the transaction.
B) Prepare document.
C) Identify accounts.
D) Record the transaction.
Work sheet
The Accounting Cycle
Accounting
After the T-accounts are created, the information must be transferred to a trial balance.
The first step in the accounting process is recording journal entries and naturally this requires a transaction. These records must be kept in chronological order and must be summarized in a useful format.
The next step is to create T-accounts or ledger accounts by taking each account and listing all the debits and credits to that account.
Mountain Bike Rentals
Trail Balance
November 20, 2012
Account Types
Debit
Credit
Cash
Accounts Receivable
Office Supplies
Office Equipment
Bank Loan
Accounts Payable
Consulting Revenue
Rent Expense
Salary Expense
Supplies Used
Utility Expenses
7000
3000
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5000
5000
1000
10000
7000
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1200
700
Totals
$23,000
$23,000
A working paper used to collect information from the ledger accounts for use in completing end-of-period activities. Is done as the fifth step!
Financial Statements
* Using the total from the income statement which is found by subtracting expenses from revenue, the owner's equity statement is prepared.
Finally, the balance sheet is completed by listing all the assets, liabilities, and owner's equity.
Balance Sheet Example

Service Revenue
To close revenue into income summary.
Income Summary
To close expense accounts into income summary.
Income Summary
To close income summary to owner's equity account.
To close owner's draw account to owner's equity.
Closing Entries
Full transcript